Healthcare merger reviews have been a key focus of the Dutch Healthcare Authority (NZa) and the Netherlands Authority for Consumers and Markets (ACM) for many years. Every year, some 150 transactions have to be notified to the NZa in the context of the healthcare-specific merger test. The reason why this number is so high (the legislature assumed it would be 25 per year) is that the NZa notification requirement already applies to transactions with one single healthcare provider that provides care with at least 50 persons. Many transactions must subsequently also be notified to ACM. ACM reviews mergers when the companies involved meet the turnover thresholds. This blog addresses the developments in the field of healthcare merger review by the NZa and ACM.
NZa
For many years, there have been calls to abolish the healthcare-specific merger test: see here, here, here, here and here. As also pointed out in this preliminary report, that test imposes a significant administrative burden on healthcare providers. The NZa appeared to have taken the criticism to heart in 2022: it made a number of changes to its merger review in July 2022, giving it a somewhat narrower scope:
- mergers must be notified only if a healthcare provider is directly involved. Since 1 July 2022, the NZa notification requirement does no longer apply to situations in which an investment company holding a healthcare provider in portfolio acquires a non-healthcare provider.
At the same time, since July 2022, the NZa merger review became more intensive on a substantial level (see also this blog):
- the merging healthcare providers must always inform their clients and employees. Parties may, however, substantiate that a merger will not affect some of the clients or employees; and
- the amount of financial information to be provided depends (in part) on the financial status of the healthcare provider concerned. The NZa thereby distinguishes various scenarios in which, more than before, a financial substantiation must be provided.
ACM’s lower healthcare turnover thresholds were abolished in January 2023. Healthcare providers must therefore now report in the NZa application form whether their transaction falls under the (abolished) lower ACM turnover thresholds. Recent financial statements must be submitted for this purpose. But there’s more. Despite p. 6 of the Integral Care Agreement (IZA) stating that administrative burdens of healthcare professionals should be reduced, the NZa opted for a remarkable development.
New NZa policy in May 2023: expansion of obligation to inform stakeholders
On 1 May 2023, the NZa again tightened the assessment framework of its merger review. For instance, it is now no longer possible to substantiate that a merger will not affect some of the clients or employees. In principle, healthcare providers must inform all clients and employees on a merger. Two exceptions apply. Clients need not be informed:
- if the care they receive is not directed at treatment, nursing or care; or
- if the transaction relates to one specific region of a national healthcare provider and they are from another region.
An exception also applies to the informing of employees:
- this duty applies only to a healthcare provider from that part of the group from which the NZa notification duty arises. In other words, if a healthcare provider with more than 50 healthcare providers is directly involved, it suffices to inform employees of that healthcare provider.
As a consequence of the NZa’s approach, clients and employees who are in no way involved in the merger will more often have to be informed. It remains to be seen whether they can exercise a meaningful right to be consulted. Be that as it may, the NZa’s approach will lead to a disproportionate administrative burden for healthcare providers. Increasing the administrative burden is not only diametrically opposed to this preliminary report, but also completely at odds with the ambitions in the IZA, supported by the NZa, to not increase the administrative burdens for healthcare providers. After we appealed to the NZa about this objective in the IZA, the NZa was willing to make concessions. According to the NZa, a healthcare provider may agree with the works councils in its group (e.g. in the form of a covenant) that transactions subject to the healthcare-specific merger test do not require a formal request for advice. In that case, a notice on the intranet suffices, according to the NZa. This obviously will not solve the problem (that can be done only by abolishing the NZa merger review altogether), but it does make a big difference in practice for parties that regularly have to deal with the NZa’s healthcare-specific merger test.
NZa imposes fines for gun jumping and prohibits acquisitions
A transaction that must be notified to the competition authorities may not be closed before approval is given (gun jumping). The NZa is on the lookout for such cases. It imposed fines for gun jumping of €65,000 and €125,000 on healthcare providers at the end of 2022. Another NZa gun jumping fine for a healthcare provider of €65,000 followed in May 2023. In light of the very low threshold that applies to healthcare-specific merger tests, it is therefore worth paying close attention to whether a merger, acquisition or joint venture may have to be notified to the NZa. Another development is that on 20 November 2023 the NZa prohibited Comed's acquisition of two GP practices. According to the NZa, the parties involved could not adequately guarantee that sufficient GP care would be available to the patients of both practices involved after 1 January 2024. Although it is unusual for the NZa to prohibit healthcare mergers, this demonstrates that the NZa is taking its merger control seriously and that ACM’s call for the power to review more healthcare mergers – more on which below in this blog – should be disregarded.
ACM
In recent years, ACM appears to be (or wishes to be) increasingly critical when reviewing healthcare mergers. For instance, it prohibited two healthcare mergers in 2021, namely (i) the acquisition of Eurocept by Mediq and (ii) the acquisition of Mauritskliniek by Bergman Clinics (more on which in this blog). The healthcare providers successfully challenged these prohibitions. The Rotterdam District Court annulled both ACM decisions this year:
- in the case of Mediq, the court found that ACM had insufficiently substantiated its market definition, which undermined ACM’s prohibition decision; and
- in Bergman Clinics, the court found that ACM had not sufficiently demonstrated that Bergman Clinics was indispensable for health insurers. Moreover, a price increase at Bergman Clinics alleged by ACM was insufficient to carry ACM’s prohibition decision independently.
ACM did not appeal the annulment of the two decisions. The above raises the question whether these false-negative decisions by ACM could have been avoided. Following the ruling of the Rotterdam District Court , ACM engaged an external advisor to provide a “self-critical advisory report”. The Gyselen report was therefore published on 14 July 2023. This report calls for further professionalisation at ACM. The report, for which only ACM (and not the healthcare providers involved or their lawyers) were interviewed, contains the following advice:
- ACM should better justify decisions by better citing sources and putting more emphasis on strengths without avoiding weaknesses;
- more attention should be paid to talks and discussion with parties before the transaction is notified to ACM (pre-notification process); and
- ACM should continue to ask questions and investigate (limited to the material facts of the decision) also after sharing the Statement of Objections (PvO).
In response to the Gyselen report, ACM reported that it would better justify decisions by explicitly identifying “counterarguments and dissenting statements”. ACM also wishes to look together with the legal profession at how to (i) set up a more intensive pre-notification process and (ii) shape the post-PvO investigation. This may lead to adjustments to the ACM Procedure in Relation to Concentration Cases.
Professionalisation of merger control is an important step in the right direction – all the more so if ACM wishes to have greater enforcement powers in this area. Merger control should be conducted with extreme care, while respecting the rights of defence. Three suggestions are made below that could contribute to a more careful and efficient process of ACM healthcare merger control:
- Transcripts: ACM interviews market parties such as health insurers in its market survey. ACM draws up only a short business report of those interviews. A verbatim transcript would increase the reliability of the market investigation and related reports.
- Insight into the file: provide the transcripts (from which confidential data has been omitted) to the merging parties in a timely manner (i.e. not, as is currently the case, only in the PvO).
- Hearing: ACM should always organise a timely hearing in the event of an imminent prohibition of healthcare mergers, to which ACM invites the reporting parties and third parties such as healthcare buyers and competitors. A hearing limits or prevents false negative outcomes (as in the case of Mediq and Eurocept). It also benefits the rights of defence.
ACM calls for amendment to Competition Act: will ‘small’ acquisitions also be reviewed in future?
Lower turnover thresholds for healthcare mergers had applied since 2007. In July 2022, the Ministry of Health reported that it would not extend the lower healthcare thresholds. Therefore, only the regular (higher) turnover thresholds have applied in healthcare since 1 January 2023. ACM is still not resigned to this: it announced on 6 November 2023 that it intended to review smaller healthcare and other transactions again. According to ACM, these smaller acquisitions may indeed give rise to competition problems. In this article, we explained that the proposal is ill-considered and unnecessary, partly because it leads to uncertainty and a greater administrative burden for healthcare providers. Moreover, it is a costly process. For instance, reporting parties must pay ACM €17,450 or €52,350 per transaction. It is also unclear whether all small (or smaller) healthcare mergers and acquisitions pose an actual competition problem. It is wiser first to investigate this properly. In the meantime, the NZa merger test applies and ACM can continue to make full use of other instruments in its enforcement arsenal. ACM may also be given the power to classify acquisitions leading to the formation of dominant healthcare organisations as abuse of a dominant position. More information on that subject can be found in this blog or in this presentation.
More information and practical tips on healthcare merger review can be found at zorgspecifiekefusietoets.nl, or listen to our podcast via Spotify or Apple Podcasts.
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